SH. AJEET SINGH,NEW DELHI vs. DCIT, NEW DELHI

The Assessee is an individual and enaged in the business of manufacturing of exports and readymade garments under the name and style of Boutique Global as proprietorship firm, which has been established on 30.06.2010. During the course of assessment proceedings, it was observed by the Assessing Officer that the assessee has not declared capital gain arises on 12.07.2007 on the sale of Shares of M/s. Boutique International Pvt. Ltd. and M/s. Boutique Clothing Pvt. Ltd. in the tune of 21,35,400/- and Rs. 18,75,000/- respectively. Notice u/s. 142(1) of the Income Tax Act, 1961 was issued on 15.04.2010, therein vide attached detailed questionnaire has asked to furnish computation of long term/short term capital gain/ loss with evidences of investment / sale etc. The assessee filed reply on 06.12.2010. The Assessee submitted that after the separation from the Partnership Business w.e.f. 30.06.2007 date coming within the impugned assessment year ending on 31.3.2008, the individual commenced its operation on and after 30.06.2007 onwards as submitted during the case proceeding dt. 02/11/2010. The assessee filed its first return of income in the Individual Capacity on dt. 16.09.2008 in accordance with the Audited Financial Statements dt. 02.09.2008 at an amount of Rs.1,31,64,170/- whereby the books of account and supporting vouchers with necessary details have been maintained and assessee is following 'Mercantile System Of Accounting’. The said details in accordance with notice dated 15/04/2010 were submitted on 06.05.2010. The assessment was completed on 30/12/2010 and the penalty order was passed thereafter.

Aggrieved by the penalty order the assessee went in appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee. Stating therein that the A.O has mentioned in the penalty order u/s 271(1)(c) that the appellant was issued a questionnaire along with notice u/s 142(1) of the Act on 15/4/2010 wherein he was asked to furnish the computation of long term/short term capital gain/loss with evidence of investment of sale etc.

The Ld. AR submitted that the assessee has already paid almost 45 lacks as his tax and there is an affidavit from the assessee as well as from his account and that. Due to inadvertent circumstances and there was a reshuffling in the partnership firm the said short term capital gain was not included in the income but when the mistake was found out by the assessee after seeing the question in law immediately the assessee disclosed the same with the letter dated 6/12/2010 of which the Assessing Officer has also taken cognizance while finalizing the penalty. The Ld. AR submitted that before the initiation of any specific query based questionnaire and or order sheet entry, the ‘assessee voluntarily realized the mistake’ on dt. 06.12.2010 whereby the amount for the ‘capital gain’ was being requisitioned as a question No.VII, IX of Questionnaire issued along with notice u/s 142(1) dated 15.04.2010 was not case specific, but a 'General Questionnaire’. This is the solitary questionnaire issued before voluntarily revising the return of income by assesse on dt. 06.12.2010. While preparing the individual Statement of Affairs as on 31.3.2008 it was found that the assessee has received Rs.21,35,400/- on 12.7.2007 from Boutique International Pvt. Ltd. and Rs.18,75,000/- on 12.7.2007 from Boutique Clothing Pvt. Ltd, which were received from sale of shares of above said companies. The capital gain on sale of above mentioned shares had not been shown due to inadvertent mistake nevertheless amounts already accounted, recoded ,disclosed & declared in the bank account no.10003717 and attributable to the unintentional and inadvertent mistake of counsel. Hence omitted the facts thereof and the assessee too signed the return likewise which came to the notice while there was the commencement of the proceedings (general enquiry {supra}) and reappraisal & re- examination of the complete records undertaken individually at the hands of the asseessee before having received any notice/order sheet entry on said capital gain. Additionally the reason for declaration through the 'revised return of income' for the capital gain is due to two reasons 1) there was partition in business of assessee with his partners and the assessee started a new proprietorship concern in the name and style of Boutique Global from 30.06.2007. Due to partition, records relating to companies were with the assessee's partner and the same were not assessable to the accountant at the time of filing of return {affidavit of assesse as well as accountant of the assessee} 2) assessee was not required to submit any personal statement of affairs as on 31.03.2007 and 31.03.2008 as the return for the AY 2007-08 was submitted in Form No.ITR-3. While during the AY 2008-09 assessee filed Income Tax return in Form No.ITR-4. As per new Income Tax Return Rules, assessee is not required to file Personal Statement of Affairs along with Income Tax Return. However while preparing personal Balance Sheet for scrutiny proceedings, the assessee found that the above said capital gain on shares was pending disclosure 'without any intention to conceal' the income as the assessee has already filed return showing income of Rs.1,32,24,171/- and 'paid tax amounting to Rs.45,69,390/-. Return Acknowledgement, Computation of Income Audit Report u/s 44AB and Audited Balance Sheet as on 31/3/2008. The Ld. AR further submitted that The assessee had given all particulars of his income and had disclosed all facts to the AO during the assessment proceedings. It is not the case set up by the AO that in reply to a query from assessee and/or some new material were discovered or some information which was not furnished by the assessee. In such circumstances, the humble prayer is to vacate the levy of penalty u/s 271(l)(c). Reliance is being placed upon CIT Vs. Suresh Chandra Mittal (2001) 251 ITR 9 (SC) wherein it is held that though the assessee surrendered additional income by way of revised returns after persistent queries by AO once the revised returns have been regularized by Revenue the explanation of the assessee that he has declared additional income to buy peace and to come out of vexed litigation could be treated as bona fide and penalty under Section 271(1)(c) was not leviable. the Unintentional and Inadvertent Mistake for the transactions having gone to omit the sight of the accountant too is evident from records resulting the same was made to pay the demands of tax due on dt. 03.12.2010 with HDFC Bank, BSR Code 0510308 SI. No.50211 being a Material on Record and with greatest respect being prayed that the levy be vacated under the aforesaid facts &circumstances of the case as explained. Since, the said was available with the assessing officer and the assessment has been completed u/s 143(3) on dt 30.12.2010 at an amount of Rs.1,50,52,122 notwithstanding the bonafide and unintentional and inadvertent mistake the order dt. 30.12.2010 was not contested in Appellate Proceedings and it cannot be construed as the confession calling for a mechanical levy on the true and correct interpretation and appreciation of Sec. 271(l)(c) Explanation 5(2). The Financial Statements having been extracted from the 'Material Particulars' and 'Material On Record' by the professional and there being appreciation and examination of the same by the AO once having recorded a Finding Of Fact (30.12.2010) qua the calling of the replies, having been submitted them regularly, along with the production of books of accounts and the supporting material would go to sufficiently show the Intention being for making the complete details availability to the AO since in the totality there are merely Non Business Usage disallowances for expenses and by any stretch of imagination on the Prima Facie Examination of the totality of the case it is evident that all effort has been towards the correct compilation, preparation, filing and presenting of the case and rendering all assistance in the interest of fair proceedings more so the pleading is not focused towards the ignorance of law rather the stress is on the compilation of the records as the partial records were received from other partner and the accountant preparing the return whose affidavit realizing the unintentional and inadvertent mistake is appended.

The Ld. DR relied on the order of the CIT(A) and the penalty order.

We have heard both the parties and perused all the materials available on record. After going through the record it can be seen that the assessee has filed return of income for almost Rs.1,31,64,117/-and for which almost 45,69,387/- tax was paid. If the assessee wanted to conceal the income or filed inaccurate particulars then he would have not filed letter dated 6/12/2010 before the Assessing Officer and immediately paid the amount taxable on the income which inadvertently not place before the authorities at the relevant time. This was mentioned in the affidavit produced before the CIT(A). As per the Hon'ble Supreme Court in case of CIT Vs. Suresh Chandra Mittal (2001) 251 ITR 9 (SC) wherein it is held that though the assessee surrendered additional income by way of revised returns after persistent queries by AO once the revised returns have been regularized by Revenue the explanation of the assessee that he has declared additional income to buy peace and to come out of vexed litigation could be treated as bona fide and penalty under Section 271(1)(c) was not leviable. Thus, the act of the assessee cannot be termed as inaccurate furnishing of income or concealment of income. Therefore, the CIT(A) as well as the Assessing Officer should have taken this aspect into consideration. This was totally ignored by both the authorities.

In the result, appeal of the assessee is allowed.

Kept for pronouncement on PS 7. File sent to the Bench Clerk 20.10.2016 PS 8. Date on which file goes to the AR 9. Date on which file goes to the Head Clerk. 10. Date of dispatch of Order.